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E-Alert Case Updates

Federal District Court without Jurisdiction to Decide Case Involving Medicare Lien Absent Final Administrative Agency Action

The Sperling Law Office, P.C. v. Catherine Anderson, et al.
Case No.: GLR-11-2905 (U.S. District Court for District of Maryland, August 10, 2012)

by Eric M. Leppo, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In this recently issued opinion by Judge George L. Russell, III in the U.S. District Court for the District of Maryland, the Court granted the U.S. Department of Health and Human Services’ (“DHHS”) Motion to Dismiss, holding that the Court was without jurisdiction to decide the matter.

Sperling Law Office, P.C. (“Sperling”), the Plaintiff in this case, served as Plaintiff’s Counsel to Catherine Anderson in a personal injury lawsuit. Ms. Anderson’s suit resulted in a monetary settlement. Prior to the case being resolved, the Center for Medicare & Medicaid Services (“CMS”) informed the law firm and Ms. Anderson of its entitlement to reimbursement based on conditional payments Medicare made to Ms. Anderson’s healthcare providers. Sperling contends that CMS agreed to accept $6,000.00 of the settlement proceeds in light of Anderson’s poor financial condition. Anderson disputes an agreement to pay any monies to CMS and claims entitlement to the entire settlement amount.

Sperling filed this case as an Interpleader action in the District Court of Maryland for Baltimore City, asking the Court to determine the proper distribution of the $6,000.00. DHHS removed the matter to Federal Court based on 28 U.S.C. § 1442 on the basis that the suit was brought against an agency of the United States. Thereafter, DHS filed a Motion to Dismiss the matter for lack of subject matter jurisdiction, arguing that Sperling had failed to exhaust administrative remedies before filing suit. DHHS argued specifically that Sperling failed to exhaust its administrative remedies because neither it nor Ms. Anderson secured a final determination, regarding the proper distribution of the settlement proceeds, from the Secretary of DHHS.

The Court raised the relevant recent amendments to the Medicare Act regarding reimbursement of Medicare’s conditional payments from a civil judgment or settlement. Under the statute, Medicare is considered a secondary payer required to make conditional payments for the care of Medicare beneficiaries whenever prompt payment from a primary insurer is unavailable. 42 U.S.C. § 1395y(b)(2). Medicare’s payments are conditioned upon reimbursement within sixty days of Medicare receiving notice that payment has been, or will be, made (“MSP claim”). Id.; 42 C.F.R. § 411.24.

The Court noted that beneficiaries who wish to challenge Medicare’s MSP claim must utilize the administrative scheme provided by the Medicare Act. In particular, those beneficiaries must present a claim to the Secretary of DHHS and then, absent a waiver, proceed through the Act’s administrative appeals process. 42 U.S.C. §§ 1395ff, 405(b).

Causes of action that arise under the Act may be reviewed by the district court only after a final decision from the Secretary. 42 U.S.C. § 405(g). A decision is final “after the individual claimant has pressed his claim through all designated levels of administrative review.” Heckler v. Ringer, 466 U.S. 602, 606 (1984).

The Court then held that Sperling’s Interpleader action was in fact a case that arises under the Medicare Act. The Court noted that Medicare’s entitlement to a portion of Anderson’s settlement proceeds is an issue governed by the Act. Sperling argued that the alleged agreement with CMS constituted a final determination from the Secretary and, therefore, full administrative exhaustion. The Court found, however, that no documentation existed to support the alleged agreement and Anderson’s claim to the entire settlement amount was not presented to the Secretary prior to filing the action.

As such, administrative remedies were not exhausted, and the Court did not have subject matter jurisdiction over the matter.


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